Everyone has an estate plan for their property— either intentionally, or by default. Each state has rules for where property goes upon a person’s death if he or she has not created a written plan. But a written plan can provide for more individual needs and decrease taxes and costs.

Estate planning involves arranging your property to make it easier to manage and distribute during your lifetime and upon your death, and to protect your property from administrative costs, taxes and creditors to the extent possible.

The Small Estate — Proportionately Higher Savings

“But I don’t have a lot of money, so do I need to do planning?”

Yes. For smaller estates, the planning focus is on reducing administration expenses.

To reduce expenses during your lifetime, you should have a financial power of attorney, and a health care power of attorney/advance directive. Otherwise, if you are unable to make decisions for yourself, a guardianship or conservatorship court procedure will be necessary to manage your property and make health care decisions for you.

To reduce costs for distribution upon death, make sure you have no assets that pass through probate. This can be accomplished with retitling such as joint tenancy, transfer on death and pay on death, and proper beneficiary designations for retirement accounts and life insurance and annuity products. Administration costs at death can be a high percentage of a small estate.

Example: A recent estate we worked on had only an automobile, a stock account and a bank account. The value of these assets totaled less than $15,000, but the costs and fees for administering even this small estate procedure was more than $1,800.

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